Seoul Administrative Court-2013-Gu Partnership-7360 ( October 28, 2014)

early 2012west 208 ( December 13, 2012)

Whether to impose additional charges on business income of illegal Internet gambling sites, and whether to deduct server rental fees when determining the estimation;

The legal principles of the Supreme Court Decision 2014Du5514 Decided July 16, 2015 can be applied to the income earned by operating the Internet gambling site.

Article 143 of the Enforcement Decree

2014Nu46340 global income and revocation of such disposition

○ ○

○ Head of tax office et al.

2015.24

oly 15, 2015

1. Of the judgment of the court of first instance, the parts against the Plaintiff and Defendant ○○ Head of the tax office are modified as follows.

A. On September 9, 2011, the head of the tax office’s imposition of global income tax amounting to KRW 0,000,000 (including additional tax) for the year 2007 against the Plaintiff shall be revoked.

B. The plaintiff's remaining claims against the defendant ○○ director are dismissed.

C. Of the total litigation cost arising between the Plaintiff and Defendant ○○ Head of the tax office, 6/10 shall be borne by the Plaintiff, and the remainder by the Defendant ○○ Head of the tax office.

2. A. The Plaintiff’s appeal against Defendant △△ Director is dismissed.

B. The Plaintiff shall bear the costs of appeal arising between the Plaintiff and Defendant △ Director.

1. Purport of claim

The imposition of global income tax of KRW 0,00,000 (including additional tax), global income tax of KRW 0,000,000 (including additional tax), global income tax of KRW 000,000,000 (including additional tax) for the year 2008 on September 9, 201 by the head of ○○ Tax Office on the Plaintiff on September 9, 201, and the imposition of KRW 007,00,000 (including additional tax) for the first half of 2007 against the Plaintiff on September 9, 201 by the head of △△△ Tax Office on the first half of 2007 against the Plaintiff, and each imposition of KRW 00,000,000 for the second half of 207 (including additional tax) for the first half of 2008.

2. Purport of appeal

In the judgment of the court of first instance, the part against the plaintiff shall be revoked." In addition to the imposition of KRW 0,000,000,000 (including additional tax) of the global income tax for the plaintiff on September 9, 201 by the defendant ○○ Tax Office against the plaintiff on September 9, 201, the imposition of KRW 0,000,000 (including additional tax) shall be revoked.

subsection (b) of this section.

The part against Defendant ○○ Head of the tax office in the judgment of the first instance against Defendant ○○ Head of the tax office shall be revoked. The Plaintiff’s claim against the above revoked part shall be dismissed.

1. Details of the disposition;

The court's explanation concerning this part is identical to the corresponding part of the judgment of the court of first instance (Article 8 (2) of the Administrative Litigation Act and the main sentence of Article 420 of the Civil Procedure Act, since this part is the same as the corresponding part of the judgment of the court of first instance (Articles 13 through 7, 9).

2. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

1) The allegation of illegality of the instant global income tax disposition

A) Claim that the Plaintiff’s income does not constitute taxable income

Since the Income Tax Act has selected so-called a principle of listing, income other than that prescribed in the Income Tax Act should be excluded from taxation. However, as the Income Tax Act was amended by Act No. 9897 on December 31, 2009 (hereinafter referred to as "the amended Income Tax Act"), the income subject to taxation was added to "income generated from the art, sports and leisure-related service business" under Article 19 (1) 17 of the Income Tax Act, and the income was added to "the income that is similar to that under subparagraphs 1 through 19 and that is continuously and repeatedly carried out for the purpose of profit-making" under Article 20 of the Income Tax Act. The income that the Plaintiff opened while operating the Internet gambling site was not listed in Article 19 (1) 17 of the Income Tax Act and Article 9124 of the Income Tax Act, and it does not constitute "the income that the Plaintiff did not explicitly list the income generated from the business of gambling and sports-related business income under the Income Tax Act before the amendment of the Income Tax Act."

B) Claims related to collection

The collection refers to a security measure to deprive a criminal of gains from a crime and prevent the criminal from holding illegal profits. As such, in the event of collection, the criminal does not actually control and manage the criminal proceeds, thereby losing his/her ability to pay income tax as a premise of imposing income tax. Therefore, income tax cannot be imposed on the criminal proceeds collected. Since the Plaintiff was subject to the collection of all gambling revenues obtained through the opening of gambling, the disposition of imposing global income tax of this case is unlawful.

C) Claim concerning necessary expenses

"The plaintiff shall pay at least 105 billion won to the employees of "ZREA" from 2007 to 2008 (In depth, wages of at least 60 million won, bonuses of at least 20 million won, bonuses of at least 250 million won, bonuses of at least 250 million won, 27.5 million won, bonus of at least 27.5 million won, transferred bonus of KRW 30 million, bonus of KRW 15 million, bonus of KRW 10 million, bonus of KRW 50 million, and Park Jong-jin-jin, housing tax of KRW 15 million: bonus of at least KRW 120 million, salary of KRW 30 million, bonus of KRW 30 million, bonus of KRW 50 million, salary of KRW 15 million, salary of KRW 200 million, salary of KRW 330 million: salary of previous illness.

In addition, around November 2007, the Plaintiff paid KRW 341,507,696 in total as rent from the company "ZZ" in Japan to June 2008, and paid KRW 105,959,98 in relation to the server "YYYY" company around November 2007, and KRW 205,192,498 in total as KRW 99,232,500 in relation to the server around January 2008 and 2008. Accordingly, the Plaintiff’s imposition of KRW 1,551,70,194 in relation to the business income in 2007 and 2008 should be asserted as the necessary expense (= KRW 1,005,000 in + KRW 341,50,69,00 in value-added tax + KRW 36965,299,298).

A) The assertion that he/she engaged in gambling business abroad

The place where the service is provided does not constitute value-added tax if it is not a domestic but a foreign country. However, the Plaintiff opened and operated the Internet gambling site in Malaysia under the trade name of Z.ZREA. Therefore, the instant disposition imposing value-added tax on the Plaintiff under the premise that the Plaintiff operated the Internet gambling site in the Republic of Korea through Magna is unlawful. The instant disposition imposing value-added tax on the Plaintiff is unlawful, and even if the Plaintiff had the place of business called Magna in the Republic of Korea, the place where the services are provided is a foreign country, such as Malaysia, the United States, Japan, etc., and thus, the Plaintiff is not obliged to pay value-added tax

B) Claims relating to gambling import

Value-added tax is an indirect consumption tax that imposes value added at the transaction stage. Thus, in order to be subject to the Value-Added Tax Act, it should be premised on the fact that the value was added through the relevant business operator in the transaction stage. However, it does not constitute value-added tax because the customer's gambling income excluding the money received by the customer from the money does not create any added value. However, while operating the gambling site, the Plaintiff gains profit by providing 89% of the money to the winner according to the game's plaque and receiving the remaining 11% of the money. This constitutes gambling income, which is not subject to value-added tax.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) As to the allegation of illegality of the instant disposition imposing global income tax

A) As to the assertion that it is not subject to taxation

Article 19 (1) of the former Income Tax Act (amended by Act No. 8825 of Dec. 31, 2007) provides that "business income shall be the income falling under any of the following subparagraphs generated in the year concerned" and Article 15 of the former Income Tax Act provides that "income generated in the society and private service business" means income generated in the year concerned. However, as the former Income Tax Act was amended by Act No. 8825 of Dec. 31, 2007, Article 19 (1) 15 of the former Income Tax Act (amended by Act No. 8825 of Dec. 31, 2007) was amended to "income generated in

The term "income from social and private service business" under Article 19 (1) 15 of the former Income Tax Act (amended by Act No. 8825 of Dec. 31, 2007), "income from service business related to recreation, culture and sports, and other public, repair and private service business" under Article 19 (1) 15 of the former Income Tax Act, and "income from service business related to art, sports and leisure" under Article 19 (1) 17 of the amended Income Tax Act, cannot be deemed as the same concept. However, income acquired by the plaintiff by operating the Internet gambling site can be deemed as all included in the concept of the above three provisions. Moreover, income from the plaintiff's operation of the Internet gambling site can be deemed as included in the scope of income under the Income Tax Act in a broad and ambiguous state.

It can be seen that the defendant has been revised in the direction of detailed classification. Accordingly, the income of 207 from the plaintiff's gambling income in 2007, which occurred prior to the revised income tax law, is "income from social and personal service business" under Article 19 (1) 15 of the former Income Tax Act (amended by Act No. 8825 of Dec. 31, 2007), and the income in 2008, is "income from the social and personal service business" under Article 19 (1) 15 of the former Income Tax Act (amended by Act No. 8852 of Feb. 29, 2008), and it can be viewed as "income from the service business related to recreation, culture and sports, other public, repair and personal service business" under Article 19 (1) 15 of the former Income Tax Act, and thus, each comprehensive income tax may

In the end, the plaintiff's assertion on this part is without merit.

B) As to the assertion regarding collection

(1) The purpose of confiscation or collection under the Criminal Act is to deprive a person of gains from a criminal act and prevent him/her from holding unjust gains. Thus, if confiscation or collection was made with respect to such unlawful income, it shall be deemed that the possibility of loss of economic gains inherent in such unlawful income is realized.

Therefore, in such a case, since the income is not ultimately realized, it is reasonable to deem that a change in the tax base and the basis for calculating the amount of tax occurred after the establishment of the tax liability to have the taxpayer applied for reduction by proving the relevant fact. In other words, even if the tax liability established once it satisfies the taxation requirements, such as control and management of illegal income, the possibility of loss of economic benefits inherent in the illegal income, such as confiscation or collection, becomes realistic, and the possibility of loss of economic benefits inherent in the illegal income becomes final and conclusive as it is not realized, barring any special circumstance, a taxpayer may be deemed to have been exempted from the tax liability by filing a subsequent request for correction stipulated in Article 45-2(2) of the Framework Act on National Taxes, barring any special circumstance (see Supreme Court Decision 2014Du5514, Jul. 16, 2015). This legal doctrine can be applied to cases where income is obtained by operating the Internet gambling site.

(2) Comprehensively taking account of the overall purport of arguments as to this case’s health care room, Gap evidence Nos. 5-1, 2, and Eul evidence No. 24, the plaintiff was sentenced to 1 year of imprisonment with prison labor of 2009No000,000 and KRW 5,648,756 on April 1, 2010, and 200,000,000,000 won of the above 700,000 won of the above 700,000 won of the above 700,000 won of the above 500,000 won of the above 205,000 won of the above 70,000 won of the proceeds of the sale of this case’s land. The above judgment became final and conclusive on July 29, 201, and the plaintiff acquired the above 105,000,000 won of the proceeds of the sale of this case’s land from the sale of this case’s 200.

According to the aforementioned legal principles and the facts acknowledged as above, the amount used by the plaintiff to purchase the land of this case among the proceeds from the crime of opening the gambling of this case was 3 billion won. Accordingly, a surcharge was imposed on the amount of 5,648,085,756 won converted from the total sale price to the ratio of the above 3 billion won out of the value of the land of this case calculated based on the officially assessed individual land price in 2009. From among the proceeds accrued from the crime of opening the gambling of this case by the plaintiff, 3 billion won from among the proceeds accrued from the crime of opening the gambling of this case was paid by the plaintiff, the said surcharge was not ultimately realized. Meanwhile, since the above 3 billion won was paid as the proceeds from the crime of opening the gambling of this case among the proceeds used to acquire the land of this case, the above 3 billion won as the proceeds from the public sale of this case was paid as the proceeds from all on November 21, 2007 and December 20, 2007.

Therefore, among the instant global income tax imposition disposition, the part regarding KRW 1,014,621,926 of the global income tax for the year 2007 is unlawful. The Plaintiff’s assertion is with merit within the scope of recognition.

C) Regarding the assertion of necessary expense deduction

(1) Part on personnel expenses

Article 8(2) of the Administrative Litigation Act, Article 420 of the Civil Procedure Act, since this part of the court's explanation is the same as the corresponding part of the judgment of the court of first instance (Articles 10 through 11).

this shall be quoted by the main sentence.

(2) On the server cost portion

(A) The part related to the Japanese company

1) The Plaintiff asserts to the purport that it is unreasonable to regard the Plaintiff’s total amount of KRW 3 billion as the Plaintiff’s gambling income in 2007, even if the Plaintiff used part of the amount of custody that was prepared to pay for the currency exchange to the game users, the amount of KRW 1,683,828,363, excluding the amount of KRW 1,316,171,63, which was determined by the Defendant as the Plaintiff’s income amount in 2007, should be deemed as using part of the amount of custody prepared to pay for the currency exchange to the game users. However, the Plaintiff’s assertion on this part is difficult to accept.

The main text of Article 143(3) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 20618, Feb. 22, 2008) provides that "where the amount of income is estimated or revised pursuant to the proviso of Article 80(3) of the Act, it shall be determined by the method falling under each of the following subparagraphs." The main text of subparagraph 1 provides that "the method of determining or revising the amount obtained by deducting the amount of income from the amount of income under each of the following items as the amount of income (hereafter in this Article, referred to as the "standard amount of income"), and item (a) provides that "the purchase cost (excluding the purchase cost of fixed assets for business; hereafter in this Article, the same shall apply)

According to the above evidence, it is recognized that the Plaintiff paid 83,979,832 won in total in the year 2007, and 257,527,864 won in total in the year 2008. However, the title of the contract (Evidence 9) submitted by the Plaintiff by asserting that the Plaintiff entered into a server lease contract with the “ZZ” is indicated as “the terms and conditions for the use of the Colc and server hosting services,” and the additional clauses attached to the end of the above terms and conditions, the “Colc services provided to the contract party” are limited to the line/Rk/Ser condition part, and are not subject to authority and responsibility for remote connection and internal operation of servers,” and Article 2 subparag. 7 of the above terms and conditions provide that “The service provided to the contract party to the contract is not subject to authority and responsibility for the customer’s operation.”

It is recognized that the information "services (Internet Data Center; INTSNE DDA CENER) is an entrusted service that directly connects to the Internet white paper," and that the National Tax Service's questioning meeting (value-Added Tax and Value-Added Tax-1078, September 8, 201) is also considered as a business service.

In light of the following circumstances known by the above recognition: (a) according to the contract between the Plaintiff and the “ZZ” and the Plaintiff, the contract entered into between the Plaintiff and the “ZZZZ” appears to be a contract for the “ZZZ”; (b) however, the “ZZ” service is merely merely limited to the “services which directly connects the equipment owned by the customer from the customer to the Internet white part of the IDC; and (c) the National Tax Service’s inquiry at the National Tax Service also considers the “ZZZ” as a business service rather than the lease cost for the fixed assets for business. However, according to Article 143(3)1(a) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 20618, Feb. 22, 2008), the Plaintiff’s assertion on this part of the business service cannot be a necessary expense or the Plaintiff’s assertion on this part is without merit.

This Court's explanation is identical to the corresponding part of the judgment of the court of first instance (from 13th to 15th page). Thus, this Court's explanation is accepted in accordance with Article 8 (2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

2) As to the allegation of illegality in the imposition of value-added tax of this case

This Court's explanation is the same as the corresponding part of the judgment of the court of first instance (from 14th to 13th 8th 16th 16th 8th 14th 14th 14th 14th 16th 16th 8th 8th 2000).

3. Conclusion

Therefore, the plaintiff's claim against the head of ○○ Tax Office is justified within the scope of the above recognition, and the remaining claims are dismissed as it is without merit, and the plaintiff's appeal against the head of △△ Tax Office shall be dismissed as it is without merit. Since the part of the plaintiff's claim against the head of ○○ Tax Office in the judgment of the court of first instance is unfair differently from the above conclusion, the part of the plaintiff's appeal against the head of ○○ Tax Office and the appeal against the head of ○○ Tax Office shall be accepted, and the part of the plaintiff's claim against the head of ○○ Tax Office shall be modified as prescribed in Paragraph (1)